Home > Uncategorized > Can you interpret the FCRA without actually interpreting it?

Can you interpret the FCRA without actually interpreting it?

January 11, 2013

The FCRA imposes statutory damages for “willful” violations of its terms:  the damages are $100 to $1000 per incident.  As a result, any number of class actions have been and will be filed that accuse a corporation of “willfully” violating the FCRA through some repetitive and standard practice.  For example, if a large corporation “willfully” violates the FCRA every time someone applies for a job, and if it receives 1,000 job applications per year, then it could be liable for 1,000 applications x $1,000 per violation = $1,000,000.  As a result, it is of no small importance to understand what a “willful” violation is and isn’t.

In 2007, the Supreme Court provided some clarity when it issued its opinion in Safeco Ins. Co. of Am. v. Burr, 551 U.S. 47 (2007).  I won’t bore you with the details, but Burr held that if a company does something that it thinks is acceptable under the FCRA, the company is not acting willfully, even if the court later disagrees with the company’s interpretation and says that what the company has been doing is wrong, provided that the company’s interpretation of the FCRA is “not objectively unreasonable.”  In other words, a company that takes a reasonable position on what the FCRA requires isn’t acting willfully, even if a court later decides that the company’s position is not the correct one.

This begs the question of whether a company’s lawyers need to sit down and think about the FCRA and its requirements to take advantage of the decision in Burr.  Suppose that a company, without really thinking about it, takes a position on the FCRA that turns out to be incorrect, but not so incorrect as to be reckless.  Does that company get liability protection under Burr?

The Third Circuit Court of Appeals just gave us its answer:  yes.  Fuges v. Southwest Fin. Servs., Ltd., No. 11-4504, 2012 U.S. App. LEXIS 25009 (3d Cir. Dec. 6, 2012).  The plaintiff in Fuges argued that Southwest willfully violated the FCRA by providing a bank with inaccurate information about her home mortgage history.  Southwest argued that it never thought its reports were governed by the FCRA.  The trial court, without bothering to say whether the reports were or weren’t governed by the FCRA, held that because it was a close question (Southwest’s reports, being restricted to mortgage histories, don’t contain a lot of the data that a typical consumer report does), Southwest’s interpretation was not unreasonable, and it didn’t act willfully under Burr.

On appeal, the plaintiff/appellant argued that the trial court made a mistake because there was no evidence that Southwest had ever sat down and made an interpretation of what the FCRA required.  How could it avoid liability for its interpretation of the FCRA when it had never actually made such an interpretation in the first place?

The Third Circuit upheld the trial court and disagreed with the plaintiff/appellant.  It stated that:

In summary, Southwest does not lose the potential protection of the “reasonable interpretation” defense, even if it never actually interpreted FCRA prior to the commencement of this lawsuit. [Burr] requires only that “the company’s reading of the statute is objectively reasonable,”  and that the interpretation that would allow the conduct in question is “an interpretation that could reasonably have found support in the courts.”  [Burr] does not require that the defendant actually have made such an interpretation at any particular point in time.

So there we have it.  You CAN interpret the FCRA without actually interpreting it.


Categories: Uncategorized
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